Key Takeaways:
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The gap between Class III and IV prices continues to widen. While fundamentals don’t necessarily support the elevated butter prices of late, buyers are anxious to avoid the fall price peak observed in 2022 and 2023, keeping Class IV prices lofty. Additionally, NDM futures have remained relatively stable over the last month. NDM is primed to take off IF international demand rises or buyers find they must replenish winnowed inventories.
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Meanwhile, the Class III complex is lacking support. While cheese exports are seeing strong growth and milk production remains tight, domestic consumption continues to be poor, hindering prices. Further, dry whey prices have moved down as export demand dries up and more low protein spec is made nearby.
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For farmers, especially Class III-heavy producers, margins during the first half of 2024 are not much to get excited about and most are likely below breakeven. Low profits, expensive heifers, threat of avian influenza spreading, and limited cow inventories will make a meaningful expansion in 2024 difficult. That being said, milk and feed futures for the second half of 2024 currently hover around levels exceeding previous years. We continue to encourage producers to take action on these opportunities using flexible coverage options, allowing for additional profitability if market conditions become more favorable.
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